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Lawmakers Brief Business Leaders On Fiscal Crisis

OCEAN CITY – State lawmakers met with Ocean City business leaders this week for a legislative briefing on the upcoming General Assembly session, and while a wide variety of topics were discussed, the conversation inevitably returned to the rather dismal situation with the state’s economy.

Just one week after Maryland Gov. Martin O’Malley announced the latest round of state budget cuts totaling $450 million, largely on the backs of local jurisdictions including $2.6 million for Worcester, the county’s representatives in Annapolis met with the Ocean City Economic Development Committee (EDC) on Wednesday to discuss issues germane to the resort area. Like every other jurisdiction in the state, Ocean City and Worcester County have been affected by the budget cuts and will continue to feel the effects of more cuts anticipated in the future.

“We’re in a tremendous budget difficulty right now,” said Senator Lowell Stoltzfus (R-38). “It’s going to be difficult for the foreseeable future. It mostly because of the economic downturn, but I can say we’re much better off than some states.”

Delegate Norman Conway (D-38B) agreed the latest round of cuts were substantially on the backs of the local jurisdictions. Conway told EDC members he understood the impacts of the newest budget cuts and while they are necessary, it doesn’t make them any less difficult to bear for the counties and towns.

“These are very difficult reductions here,” he said. “We knew they were coming, but it doesn’t make it any easier. We know people are going to be concerned and that these cuts are going to cause a lot of angst.”

Conway, chair of the House Appropriations Committee, said despite the recession, special interest groups continue to clamor for more state tax dollars, causing a continued drain on the spending side while the revenue side remains stagnant.

“There are 700-plus organizations and advocacy groups that come through my office and not one ever asks for anything to be reduced,” he said. “There is an advocacy group for just about everything you can imagine out there. We have to close the gap between spending and revenue. We have to bring those lines together.”

While the state has been successful in trimming spending – the General Fund budget is at its lowest point in two years thanks in large part to expansive cuts – the larger problem for Maryland continues to be the revenue side. In 2008, state lawmakers attempted to address the revenue side of the equation with the most expansive tax increase package in recent memory, but the hikes have failed to produce real results in terms of expanding the state’s revenue base, according to Delegate Page Elmore (R-38A).

“In 2008, the estimates on revenue went way up based on the increase in taxes, but it never happened,” he said. “Now, we have higher revenue estimates than we can’t possibly meet. The tax increases were supposed to open the floodgates on revenue, but it never happened. In all probability, the Board of Public Works will have to make more cuts when the new revenue estimates come out later this month.”

Conway agreed stagnant state revenue is as much to blame for the state’s economic crisis and overspending. He pointed out just how far the General Fund budget has been cut and still the gap between spending and revenue continues to widen.

“The General Fund budget is lower than it has been since 2007,” he said. “That just illustrates what has happened on the revenue side.”

Of course, the approval of slots in the November referendum was supposed to provide a panacea for the state’s revenue problems, but the process to implement them has been slow and the proposals on the table include numbers of machines much lower than the new state law allows. Stoltzfus said slots at Ocean Downs would likely become a reality in the near future.

“Ocean Downs is far ahead of anywhere else in the state,” he said. “That will happen here faster than anywhere else. It’s here. It’s on its way.”

Conway pointed to unfunded mandates as large contributors to the state’s budget problems. He pointed out the Geographic Cost of Education Index, a tool used by the state to adjust aid to jurisdictions based on the varying cost of providing education, has grown from $8 million at its inception to $121 million today. He also pointed out how the Thornton education spending plan has also strayed from its original intent.

“Thornton, as great as it was in addressing equity and adequacy, has grown away from that,” he said. “The only thing the state is required to do by law is provide public education. There is nothing in the state Constitution to support unfunded mandates.”

While his colleagues were painting a rather dismal picture of the state economy, Mathias, who was celebrating his birthday on Wednesday, took a different tack. He extolled the virtues of everything the state has been able to maintain and accomplish despite the recession.

“It’s been a bumpy road, but sometimes you have to take a look at the bright side,” he said. “We have the best education system in the country, probably the best healthcare system in the country and we’re moving forward. People ask me all the time what their tax dollars are doing for them and I have to point out these things.”

Elmore said continuing to invest in the very areas Mathias pointed out could lead the state out of its financial difficulties.

“What can we do to solve our fiscal problems? Go back to our core values,” he said. “That means pre-K-12, public safety and public health. We need to take care of that first, and if there is anything left over, we can start to look at these hundreds of other programs and groups.”

Elmore also urged more accountability for the interest groups that siphon money from the state economy. He suggested they be carefully reviewed to determine just how they are utilizing state dollars.

“We need an audit of these things,” he said. “We don’t know what’s producing results and what is not. We need to look at where we’re getting the most bang for our buck.”

In one of the more poignant moments of the EDC meeting on Wednesday, Elmore referred to a quote from President Abraham Lincoln that appeared to strike a chord with those in attendance.

“You cannot help the poor by destroying the rich; you cannot strengthen the weak by weakening the strong; you cannot bring about prosperity by discouraging thrift; you cannot life the wage earner by pulling down the wage payer; you cannot further the brotherhood of man by inciting class hatred; you cannot build character and courage by taking away men’s initiative and independence; and you cannot help men permanently by doing for them what they could and should do for themselves,” the passage reads.

Despite all the gloom and doom, Elmore left EDC members with a reason for hope.

“This economic downtown will pass,” he said. “They always do. Hopefully, it will happen by 2011 and maybe sooner.”